Gran Colombia Announces Terms for Its Proposed US$152 Million Debt Financing

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TORONTO, Feb. 15, 2018 (GLOBE NEWSWIRE) --  Gran Colombia Gold Corp. (the “Company” or “Gran Colombia”) (TSX:GCM) provided further details today for its recently announced best efforts private placement of up to 152,000 units (the “Units”) of the Company for anticipated aggregate gross proceeds of up to US$152,000,000 (the “Offering”). GMP Capital Inc. (“GMP”) and UBS Securities LLC (“UBS” and collectively with GMP, the “Agents”) have been retained as agents in connection with the Offering.

Serafino Iacono, Executive Co-Chairman of Gran Colombia, commented: “We have been successfully turning around our operations the last two years since we restructured our debt into the current convertible debentures, improving our production, our adjusted EBITDA and our free cash flow. We remain committed to enhancing shareholder value and we believe the dilution overhang from our convertible debentures, as many investors have also communicated to us, is having an adverse impact on our share price relative to comparable valuations for our peers. For this reason, in light of the current market conditions, we are proceeding with the Offering to allow the Company to simplify its capital structure, having just one long-term debt instrument, and to enhance shareholder value by capping the potential dilution to existing shareholders through exercise of the new warrants at 18.8 million additional common shares compared with a range of 18.7 million to 72.1 million additional common shares under the current convertible debentures. We are also appreciative of the support received from debt holders in the 2016 debt restructuring who are now going to see full repayment of their debentures at par upon the successful completion of the Offering.”

The key terms being offered include:

1. Each Unit will consist of US$1,000 principal amount of senior secured gold-linked notes (the “Notes”) and 124 common share purchase warrants (the “Warrants”) of the Company. Each Warrant will have an exercise price of CA$2.20 per warrant and will entitle the holder to purchase one common share at any time prior to the maturity of the Notes. Subject to minimum listing requirements, the Company will take commercially reasonable efforts to have the Warrants listed.
2. The net proceeds of the Offering will be used for (1) the redemption in full, at par, of the Company’s (a) Senior Unsecured Convertible Debentures due 2018, (b) Senior Secured Convertible Debentures due 2020 and (c) Senior Secured Convertible Debentures due 2024 (the securities referred to in (a), (b) and (c), collectively, the “Outstanding Debentures”) and (2) general corporate purposes.
3. The Notes will have an eight-year term and are non-callable for the first three years.
4. The Notes will represent senior secured obligations of the Company, ranking pari passu with all present and future senior indebtedness and senior to all present and future subordinated indebtedness of the Company. Standard high yield covenants consistent with transactions of this nature will apply.
5. The Notes will bear interest at 8.00% per annum, paid monthly.
6. The Company will set aside an amount of physical gold each month in a trust account (the “Gold Trust Account”). On a quarterly basis, the physical gold in the Gold Trust Account will be sold and the sale proceeds will be used to amortize the principal amount of the Notes based on a guaranteed floor price of $1,250 per ounce. The Note holders will be entitled to receive a premium on the quarterly repayments based on the sale price realized up to a ceiling of $1,400 per ounce. The Company will retain any excess sale proceeds above $1,400 per ounce. The scheduled annual number of physical gold ounces to be deposited into the Gold Trust Account will vary by year, ranging from 23,000 ounces in the first year down to 4,000 ounces in the seventh year and a balance of 23,600 ounces in the final year of the term of the Notes.
7. There is no mandatory redemption of the Notes prior to maturity, although the Company may be required to make an offer to repurchase the Notes if there is a change of control or following certain asset sale transactions.
8. The Notes provide for standard high yield optional redemption provisions.
9. Closing of the Offering will take place following receipt of shareholders’ approval for issuance of the Warrants as discussed below.

Fitch Rating

Fitch Ratings has assigned an initial rating of “B-“ to Gran Colombia with a Rating Outlook of Stable. Additional information with respect to this rating may be found at www.fitchratings.com.

Existing Holders of the Outstanding Debentures Are Eligible to Participate in the Offering

Existing holders of the Company’s Outstanding Debentures that are eligible to participate in the Offering may (subject to complying with certain procedures and requirements) be able to do so by directing some or all of the redemption proceeds from their current debentures into Units on a dollar-for-dollar basis.

Special Shareholders’ Meeting to Approve Issuance of the Warrants

The Offering includes the issuance of Warrants that, upon exercise in aggregate, would result in potential dilution to existing common shareholders in excess of 25%. In accordance with the rules of the Toronto Stock Exchange (“TSX”), the Company is seeking approval for the issuance of the Warrants from its shareholders of record on February 20, 2018 at a Special Shareholders’ Meeting scheduled to take place on March 26, 2018.

Early Redemption of the 2018 Debentures

Following closing of the Offering, the Company will be giving notice to the trustee for the early redemption of all of the issued and outstanding 2018 Debentures at par on or about April 30, 2018.

Consent Solicitation to Expedite Early Redemptions of the 2020 Debentures and the 2024 Debentures

To expedite the early redemptions of the 2020 Debentures and the 2024 Debentures following closing of the Offering, the Company will be seeking consent from the holders thereof to remove the notice period for the early redemption. This will allow the Company to complete the early redemption of all of the issued and outstanding 2020 Debentures and 2024 Debentures at par on the closing date of the Offering. Materials related to the process to obtain debenture holders’ consents are expected to be distributed by the Company on or about March 1, 2018.

Other Approvals

The completion of the Offering is also subject to the receipt of all necessary regulatory and stock exchange approvals including the receipt of approval by the TSX. Terms outlined herein may be amended as required to receive such approvals.

About Gran Colombia Gold Corp.

Gran Colombia is a Canadian-based gold and silver exploration, development and production company with its primary focus in Colombia. Gran Colombia is currently the largest underground gold and silver producer in Colombia with several underground mines in operation at its Segovia and Marmato operations. Gran Colombia is continuing its expansion and modernization activities at its high-grade Segovia Operations.

Additional information on Gran Colombia can be found by reviewing its profile on SEDAR at www.sedar.com and on its website at www.grancolombiagold.com.

The distribution of this announcement may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

This announcement does not constitute an offer of securities for sale in the United States, nor may any securities referred to herein be offered or sold in the United States absent registration or an exemption from registration as provided in the U.S. Securities Act of 1933, as amended (the “Securities Act”) and the rules and regulations thereunder.  The securities referred to herein have not been registered pursuant to the Securities Act and there is no intention to register any of the securities in the United States or to conduct a public offering of securities in the United States.

Cautionary Statement on Forward-Looking Information:

This news release contains "forward-looking information", which may include, but is not limited to, statements with respect to the Offering, including the expected timing and receipt of any required regulatory and shareholders’ approvals, the closing of the Offering, the expected use of proceeds, the redemption of the Outstanding Debentures, the anticipated improvement to the Company’s capital structure and reduction of potential dilution, anticipated business plans or strategies. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Gran Colombia to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause actual results to differ materially from those anticipated in these forward-looking statements are described under the caption "Risk Factors" in the Company's Annual Information Form dated as of March 30, 2017, which is available for view on SEDAR at www.sedar.com. Forward-looking statements contained herein are made as of the date of this press release and Gran Colombia disclaims, other than as required by law, any obligation to update any forward-looking statements whether as a result of new information, results, future events, circumstances, or if management's estimates or opinions should change, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.

For Further Information, Please Contact:
Mike Davies
Chief Financial Officer
(416) 360-4653
investorrelations@grancolombiagold.com